How Much Do You Really Need to Retire?
"How much do I need to retire?" is one of the most common questions we hear from our retirement planning clients.
The truth is, there's no single magic number that works for everyone. While we can look at industry averages, your ideal retirement figure is as unique as your fingerprints.
It's not just about a number; it's about the lifestyle you want to live. Our goal is to create Financial Planning that helps you Live Well.
The ASFA Retirement Standard: A Great Starting Point
For decades, the Association of Superannuation Funds of Australia (ASFA) has provided a helpful benchmark. It breaks down retirement lifestyles into two main categories: "modest" and "comfortable." These figures are a good way to get a feel for what different retirement budgets look like and are a crucial first step in building your personal retirement income plan.
As of the March 2025 quarter, ASFA's estimates for home-owning retirees aged 65-84 are:
A "Modest" Retirement: A single person needs an annual budget of around $33,386, while a couple needs about $48,184. This covers basic expenses but doesn't leave much room for luxuries. It’s a simple lifestyle with occasional outings and domestic trips, and it’s better than living on the Age Pension alone.
A "Comfortable" Retirement: For this lifestyle, a single person would need around $52,383 a year, and a couple would need $73,875. This budget allows for things like a good car, private health insurance, dining out, and more frequent holidays, including occasional overseas trips. This is a good starting point for many Australians.
Your Retirement Is Personal: Three Questions to Consider
ASFA's figures are based on averages, but your life is anything but average. To find your number, you need to think about what you want your retirement to look like. Here are three key questions to get you started on your retirement planning:
1. What's your housing situation? This is one of the most important factors. If you'll have your home loan paid off, your annual living costs will be significantly lower. If you’ll still have a mortgage, or if you plan to rent, your costs will be much higher, and you'll need a larger nest egg.
2. What does "comfortable" mean to you? ASFA's definition might be different from yours. Do you dream of traveling the world, or do you prefer to spend time with family at home? Do you have expensive hobbies like golf or sailing? Your ideal lifestyle is the key to calculating your specific budget.
3. Have you considered your eligibility for Centrelink and the Age Pension? For many Australians, the Age Pension or other Centrelink payments are a vital part of their retirement income strategy. We can help you understand the eligibility criteria and how these payments fit into your overall plan.
Building Your Retirement Income Plan: Super, Centrelink, & More
Retirement planning has many moving parts. A key aspect is to balance the income that can come from various sources. Your retirement income plan is a mosaic of different sources. We work with clients to balance income from their superannuation (via an Allocated Pension or annuity), shares, investment properties, and, for many, vital government support. We specialize in helping you navigate the rules around Centrelink and the Age Pension, ensuring you get every dollar you're entitled to.
A Flexible Retirement Strategy for All Stages
The ASFA averages are for people aged 65 to 84. This is a long time, and we see with our clients that things do not stay the same. Their needs and wants will vary. Early in retirement, you are often more active, and travel and experiences are a big part of life. Then, invariably, things quieten down. Having a flexible strategy that allows you to change your retirement income is crucial.
Taking Control of Your Future
The goal isn't just to accumulate a certain number; it's to create a plan that gives you confidence and clarity for your future. This is what financial planning should be.
Don't leave your retirement to chance. As a financial planner in Melbourne who specializes in retirement planning, I can help. Let's work together to make sure you're well on your way to the lifestyle you've been working towards.